[Stock of the Week] Doosan Rides the AI Wave... Presidential Election Boost Lifts Holding Companies

Editor's NoteTo all retail investors dreaming of successful investments: How well do you really know the stocks you buy with your own money? In an online environment flooded with unfiltered information, Asia Economy aims to be your hands, feet, eyes, and ears, delivering accurate information about companies. Each week, we focus on companies that ranked high in FNGuide’s stock search rankings, providing not only basic information but also analysis of related companies such as partners, clients, and investors. We will break down the company’s financial status, performance, and future value in an easy-to-understand way. We bring you the week’s most notable stocks, under the name “Stock of the Week.”

"Opportunity comes to those who are prepared." "Special One." "Get on the running horse."

These are the titles of recent analyst reports on Doosan Corporation, whose share price surged by nearly 50% in May. As the holding company of the Doosan Group, Doosan is expected to achieve record-high results this year in its core business, the Electronic Materials (Electronics BG) division. Additionally, the company has been identified as a beneficiary of the policy trends following the June 3 presidential election, where enhancing shareholder value became a key topic in the capital market. With its unrivaled competitiveness in its main business and additional upward momentum from external factors, securities firms are raising their target prices for Doosan.

On June 2, the day before the presidential election, Doosan closed at 486,500 won per share on the Korea Exchange, down 0.31% from the previous trading day. Although trading ended slightly lower that day, the share price has risen more than 80% compared to the beginning of the year, when it was in the 260,000 won range. In May alone, the stock gained more than 46%. During this period, net foreign purchases amounted to approximately 103 billion won.

Doosan Leads in High-End CCL... "All Upstream Demand Improving"

The first reason the market is focusing on Doosan is the high competitiveness of its core business. Doosan, as a holding company with subsidiaries such as Doosan Enerbility, Doosan Bobcat, and Doosan Robotics, operates in electronic materials, information and communications (DDI), and distribution (Doota Mall) as its own businesses. Among these, the Electronics BG division surpassed 1 trillion won in sales last year, reaching an all-time high.

In particular, copper-clad laminate (CCL) produced by Doosan Electronics BG is considered a key material for printed circuit boards (PCBs), which are responsible for circuit connections and signal transmission in electronic devices. Since November last year, Doosan has been supplying CCL, which is also a core material for artificial intelligence (AI) semiconductors, to Nvidia. Kim Sowon, an analyst at Kiwoom Securities, noted, "CCL has entered a high-growth trajectory alongside AI," adding, "With the expansion of CCL supply for AI accelerators, the proportion of high-value-added sales rose from 69% in the first quarter of last year to 82% in the first quarter of this year." Doosan ranks second globally in CCL market share after Taiwan's EMC, but leads in the high-end segment.

Kim Soohyun, an analyst at DS Investment & Securities, stated in the "Doosan - Great Transformation" report released on May 28, "The surge in Electronics BG performance has fundamentally transformed Doosan's profitability structure." In the first quarter, Doosan Electronics BG's operating margin was 28.8%, more than double the previous normalized level. Kim attributed this to increased upstream demand and mass production sales to Nvidia, analyzing, "First-quarter mass production sales for Nvidia's Blackwell reached 160 billion won, with an operating margin of 50% for Blackwell-related products." He also raised his annual sales and operating profit forecasts for Electronics BG this year to 1.635 trillion won and 467.7 billion won, respectively, and predicted a high likelihood of simultaneous supply to Nvidia Rubin and Blackwell next year.

Kim Minkyoung, an analyst at Hana Securities, also projected that all upstream demand is improving, forecasting Doosan Electronics BG's sales at 1.7731 trillion won and operating profit at 447.1 billion won this year. She stated, "CCL for AI accelerators, whose supply ramped up from the fourth quarter last year, will drive performance throughout the year," and added, "From the second half, supply for 800G will expand, and mass production for application-specific integrated circuit (ASIC) projects may begin." She further noted, "It's not just about CCL," highlighting that the Gimje plant, dedicated to flexible copper-clad laminate (FCCL) using advanced processes, will begin operations in the second half of this year and is expected to become the next growth engine. Currently, only three companies worldwide are capable of producing FCCL using the casting method.

Yang Seungsoo, an analyst at Meritz Securities, defined Doosan as a "Special One" with proven unrivaled competitiveness, stating, "Doosan's high market share within Nvidia's supply chain, which is dominated by Taiwanese companies, highlights its unique value." The BNK Investment & Securities Research Center summarized, "The company's business competitiveness justifies even higher expectations." The center also pointed to the recent rise in Doosan Enerbility's share price, following news about nuclear power in the United States, as a positive factor for Doosan's major subsidiaries. Currently, the securities industry estimates Doosan's consolidated sales and operating profit this year at approximately 18.092 trillion won and 1.437 trillion won, respectively.

"High Treasury Stock Ratio"?Presidential Election Policy Beneficiary... Target Price Upgrades from Analysts

The recent rise in Doosan's share price has also been supported by the emergence of shareholder value enhancement and governance improvement as key topics in the capital market, triggered by the June presidential election. Traditionally, holding companies like Doosan have been considered classic undervalued stocks, often overlooked by the market. However, related policy pledges ahead of the election have sparked rallies among major holding companies.

Lee Sunghoon, an analyst at Kiwoom Securities, analyzed, "Pledges discussed during the presidential race, such as directors' fiduciary duty to shareholders, normalization of inheritance and gift taxes, and mandatory treasury stock cancellation, are all linked to corporate governance improvement and serve as factors to resolve the holding company discount." He explained, "If these policies are implemented consistently, there is further upside potential even after the election," and added, "From an investment perspective, this is a time to pay attention to holding companies amid a transformation in corporate governance."

In particular, the market is anticipating benefits from the mandatory treasury stock cancellation pledge made by President Lee Jaemyung during the presidential campaign. He previously announced plans to institutionalize shareholder return through treasury stock cancellation as part of "corporate governance improvement." As a result, expectations are rising that the stronger the new government's push for shareholder returns, the greater the potential for share price increases. Shin Minseop, an analyst at DS Investment & Securities, emphasized, "Fundamentally, treasury stock cancellation is crucial for a true value-up in domestic stocks." Doosan's treasury stock ratio is relatively high at about 18%.

Recently, the securities industry has been raising target prices for Doosan. DS Investment & Securities increased its applied multiple from 15 times to 18 times and raised its target price from 500,000 won to 580,000 won per share. BNK Investment & Securities also set a target of 600,000 won per share, reflecting higher earnings forecasts for core businesses and favorable conditions in upstream industries. Meritz Securities raised its fair value estimate for Doosan to 590,000 won per share and named it a "top pick" among its covered stocks.

Hana Securities initiated coverage with a "buy" rating and a target price of 570,000 won. Kiwoom Securities also began new coverage with a target price of 620,000 won, stating, "Despite the recent share price rise, we believe that continued expansion of new clients and product diversification momentum will sustain strong performance and share price gains."